Nexa Resources (NEXA) 28 Jul 232023 Q2 Earnings call transcript

Good morning and welcome to Nexa Resources Second Quarter 2023 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] This event is being recorded and is also being broadcast via webcast and may be accessed through Nexa's Investor Relations website where the presentation is also available. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

to conference like to now would turn over the Mr. I for Head of Cammarosano, opening Investor Rodrigo Relations remarks. ahead. go Please

Good morning, today. everyone, XXXX and welcome to Nexa call. for earnings Resources' Thanks joining us conference second quarter

the During we earnings that onscreen follow issued the we presentation to as We you with will discussing release encourage call, yesterday. along per company's be through the performance this webcast. the

And as statements I your you the attention number statements. business. two, draw about that would forward-looking to making to we just like begin, be refer we disclaimer Before conditions will ask and we our surrounding slide to the those

is introduce to our my It now speakers. pleasure

Joining our us CFO, and Senior our Vice Rosado; President Leonardo CEO, today is of Ignacio Valle; Jose Carlos del Mining, our Coelho.

call Ignacio, his the Ignacio So will over please ahead. now comments. turn for go to I

you, to and let's begin now for to this we us number thanks our move joining will morning. three, where Please, slide presentation. Rodrigo, Thank everyone

giving of of by overview you brief begin me XXXX. Let a quarter second our

to experience below expectations. We in as indicators came a economic scenario continue China from volatile macroeconomic weak

Additionally, zinc, our outlook, affecting to metal some especially inflation in are metal main economies in of monetary base growth concerns important the persistent sectors negatively and prices, addition portfolio. tight over in the global policy

CapEx, detail fell in working In working discuss difficult reduction, the scenario, XX% capital focused on initiatives will XX% the we in optimization, I more a zinc and second year-over-year. presentation. quarter, price cost on are and which quarter-over-quarter, In this later portfolio of

LME production by offset 'XX. prices, $XXX compared decreased sales partially X% by the driven lower prices by quarter revenues metal Our to the also was higher net reflecting which mainly revenue of quarter LME for million, mining volumes. lower quarter-over-quarter, XX% year-over-year and reached metal down the second metal Net

this $XX explained prices of by adjusted the compared initially. was This to million in LME first second was year metal million as the lower explained the quarter $XXX EBITDA impact in quarter year. this the performance of of Our mainly

reaffirm XXXX Despite this progressing cash hours were guidance recovery our the at that remains and we deliver June, XX% significant and the well as the like unchanged. is end we significantly. a able drop to annual in well rates prices, positive to while of plant generation, would The of reached improved nameplate that reduced the concentrates. capacity, as the plant quality of downtime Aripuana

In terms of towards increasing brownfield the moving operations. programs in mining exploration of our activities, our the are life mine exploration

option prioritizing the As mentioned to also consolidate are in near Integration Nexa future. for to growth the Pasco previous our the related our Project we presentation, in organic strategic studies robust

our in remain the business. fundamentals We long-term of confident industry and our

We will all focusing our value order continue for cost create of and on productivity to in shareholders. control safety,

regarding zinc slide year-over-year, to Now moving X% volume treated slide operating increased and ore the you performance explained mainly can of segment, production number the Mining number up of the see mine. four. In that the an Aripuana tons, XX,XXX by to four, in start-up increase

in cost by explained $X.XX cash to Compared Lindo relation resumption to year, pound zinc mining X%, volumes by-product at this to production year of pound Cerro the up and of the explained by per lower cash per higher increased prices from the last mainly quarter quarter this costs, higher $X.XX second Aripuana. of year, first of second was compared in and the quarter operations TCs. to In

range. the forecasted $X.XX in in what almost exceeded guidance of first of the lower to compared half the per for we However our year, the XXXX end our cash positively decreasing cost pound

reduce implementation which cost per of is the control, costs. decreased one we our run-of-mine, initiatives and higher metric it our to mined ore that at quarter-over-quarter to the Looking due

X% from the this the number number sales in totaled and second the of XXXX, first quarter performance of second to last segment, Smelting slide to Now moving XXX,XXX year. the In down regarding quarter of operating compared tons five, slide up metal five. quarter year, the X% of

slightly mainly higher and $X.XX in is this to pound of initiatives. of this per explained strategy last pound the sales performance improvement quarter per quarter-over-quarter cash pound $X.XX quarter production second The year the our per in volumes in quarter Smelting decreased cost by year. second of first working compared year, $X.XX and line capital to in with the

by-product both lower by purchases, mainly the In were offset concentrate prices by explained periods, of was cost affecting this lower LME zinc prices. partially decrease which

metric Our flat that conversion remained quarter-over-quarter. the we control cost, which is

six. it resilient times and this would is. In Mining slide, to I portfolio our competitive competitive and tight to of moving Now, Smelting number important to prices, of our is slide of position segments. On like highlight how the understand operations

logistic segments can to see with efficiency. costs cost Smelting flagship of and conditions to competitive are access our the you mines by adequate in in materials their quartiles lower and operational is raw Mining curves. supported operations positioned competitive costs, addition and This the polymetallic competitiveness energy and smelter As

to operate higher scope such optimization rates is In program main our to reduction equipment, different performing reduction, next and broad would as of to mining the Now are of slide. some highlight we mining on of operations. seeks number the that our and program of mine manpower contractors. of initiatives It a efficiency availability slide productivity I methods, moving levels including like seven, at

reduced our fixed smelter this variable expect and to in working to initiatives of and investments aimed extend we headcount, our start optimize will next other these operations, and next reduce and few mines the to weeks. productivity, The are of costs capital. which stage our increase program All

improving rate, and quality. increasing currently focused hours activities and to steadily we as plant well Aripuana concentrate grades continue Ramp-up metal plant at And reduction progress recoveries as downtime significantly. throughput of asset reliability, are on

an of a reached During ore volume XXX% treated XXX% tons quarter, from up while was tons, quarter-over-quarter. XXX,XXX previous increase quarter, (sic) X.X the XXX,XXX production thousand tons, zinc

slides, these next see will some the In of we improvements.

and we quarters, the previous mentioned to that recovery further pumping expect systems upcoming concentrate quarter, the we the the grades. in related piping the to and conclude in For adjustments improved the bottlenecks and

activities on resource mineral mine with Link mineral and end activities at development we at and as Babacu The continue XXXX. at deposit the the our Arex in progressed exploration quarter upgrading reserves mines. are expanding the of also again planned. And We focused

Now ramp-up moving for about reduction this KPIs slide. to of of left talk a Aripuana. Starting the some phase side, the slide, I our the will quarter-over-quarter. downtime main progress the On upper we the next noted in of of XX% with plant

in is levels. we reliability. utilization why the second on at be hours. the plant increased those XX%. Therefore, consider June, to capacity XX%. utilization in if includes utilization focused would And XX% plant Average hours, plant the do utilization are reached This already not we by quarter That much higher downtime

we in in the to the recovery, XX% increased June Finally, in which of concentrate progress can zinc see And significantly. quality zinc of reached March. XX% compared

Now next XX, tons zinc X.X XXX% production grew number slide. second XXXX, the by see On moving can that compared thousand in you of to quarter to reaching first quarter. slide the the

respectively. grew the we we of up XX%, remain completing confident months. lead Copper progress and ramp the silver the with and coming operation on by That while in XX% and said, production by are the XX% grew will focused

slide the slide, to advance studies to On to continue that Pasco number the for this like moving with technical I we would Project. Now XX. Integration highlight

scale, this unlock of project potential the the As the cost in and is calls, previous with we life for of to value had improvement been assets. important economies Nexa a discussing extension of through

focusing tailings the support integration on mines, work of increasing have of as the fronts the We four El of for the increasing as facilities capacity Porvenir functions. underway, well underground plant, the capacity storage studies

included which following focused Exploration already for activities program our the year, the supporting activities the are for mineral inventory project. on

and project approval expect year. for We by Directors with fourth in to are of moving this the submit Board the of our forward it quarter

Jose Valle, ahead. CFO, present Now our financial will Jose, I please who will Carlos turn results. call over the go our del to

Ignacio. morning to you, Thank will slide everyone. I continue Good on XX.

net can left, you on due LME with by for volume. second see, upper decreased mainly lower quarter consolidated chart XX% slightly As year-over-year, lower revenues the metal your smelting sales prices to a and beginning total

lower higher Compared and partially in mining driven revenue metal of net volumes. increase prices. production quarter X%, This an decreased XXXX, to also by was first by offset the decline by sales LME

first of to XXXX, billion half versus second XXXX. year, $XX the EBITDA the was in In billion reached first $X.X quarter $X.X the in decrease adjusted the $XXX XXXX of revenues million million compared of Consolidated the of consolidated half XX%. of quarter a net in second

decreased primarily was XX% XX%, offset higher effect. operating positive to prices, first XX% reduction Compared EBITDA zinc volumes prices metal the by important negative by respectively the by the driven Aripuana. in copper explained higher as quarter rate, XXXX, partially and well the This of start-up to of and hedge costs lower a and declines exchange by-product adjusted by impact and by as of related by

also of a adjusted EBITDA consolidated the the of reasons versus by explained first million mentioned the period $XXX half year, year, in ago. same $XXX this In reached million last moment

the XX. Now next let's slide to move

we left total top totaled of the million. investment of $XX the see mine first half million. of in the investments, development XXXX, The invested in quarter $XXX which CapEx, million $XXX On sustaining in we second slide, was the that including can

initiatives our CapEx that by Therefore, is mentioned been cost CapEx result XXXX. may for in implementing quarter It year. capital As we optimization. have the reduction Ignacio, programs downward we and on some for revise lower these likely and of next working in intensity and may initiatives focused the on guidance

million exploration $XX in project exploration and which invested first development we and mineral With support to was $XX the regards mine half of to evaluation, million of of a related total mineral exploration XXXX, to activities.

of move flow discuss on Now to which quarter I slide second cash our year. in the next the will generation the in let's

in spend XXXX $XX in taxes. paid of million we of EBITDA, our including items, quarter starting second million And of to the Aripuana. net operations, CapEx and $XX $XX related interest For non-operational adjusted and our from almost sustaining million

due cash effects and foreign our then on loans $X investments a by the driven balance the the million. the had against real positive of exchange of We impact million equivalents US cash $X and had to impact appreciation Brazilian dollar. negative Additionally, of a of

million management the positive flow a quarter working the effects of was in part second in due cash quarter capital, described free contribution above, our initiatives in of implemented $XX as improvement million. Combining $XX there a Finally, the an XXXX in all to was XXXX. of of result second

extended this sheet result debt a that balance see increased quarter to liquidity can declined positive an you Cash of to flow net term second solid profile. during slide cash we in a the continue present balance healthy with of 'XX XX. moving On generation and and slide, period. our debt the Now as remains

liquidity and X.X As a debt, average result, X.X% $XXX of million maturity an it our In available relation has current a was of facility undrawn years million. cost. including revolving credit $XXX to average approximately our

next the of X% four years, mention total cover of is XXth, as the June our of by It maturing to that payment our to maturing cash the debt is end in only all total with XXXX. important of obligations sufficient

Finally, measured EBITDA despite LME the the of mainly to quarter-over-quarter, $XX million driven leverage ratio increase prevailing last X.X EBITDA to from by the lower the times in increased adjusted balance, times cash in by months of X.X adjusted lower trend prices. XX because debt our net

moving talking Now about market fundamentals. to key slide some XX,

part highlight concerns quarter from of Chinese health driven XXXX of economies, second the quarter. ton, averaged of to interest I inflation metal this the of pace LME main reasons lower-than-expected per First, zinc sectors quarter economy and downside from in that some rates, prices quarter the driven down in and decline LME persistent resilient XX% high last were, variables some recovery relevant and price the first $X,XXX of second should in XX% the the in XXXX. global in key of The economic surprising for XXXX, about the economy, by the by

short-term, investments constructions supply infrastructure, expected believe the long-term, in positive also driven remain boosted fundamentals sector, by and auto of by sales. However, be in to by despite fulfill demand, we tight to which and vehicle the now supported feasible the forecasted zinc electric lack mid prices potential is in

XX% quarter LME copper, price Regarding and X% first XXXX. of down the the the second XXXX from is from quarter of

we a role all the demand, energy copper that transition. are In of in play will aware terms key

expected from mild a in to greenfield in volumes revert XXXX the to contributing projects side, years. and On XXXX and following in brownfield the which market, supply come are online could the surplus

Ignacio to I remarks. back his Now will the final hand over presentation for

you, Carlos. Jose Thank

certain cooperating of I commercial and of between authorities. tax-related investigation to customers would ongoing that and in second practices number In would with net line one our of going like XXXX VAT on disclosures State year. quarter provision inform Before fully Nexa quarter's financial the of of mention regarding that has last like slide our XX, income I this Nexa's the an with to impacted Gerais Minas XXXX, been

Considering that make does to payments higher the decide future them may behalf make responsibility the avoid imply with Nexa Nexa to the amounts to current on customer the a if the deferred voluntarily not reserves customers recover exposures VAT to some of secondary and liabilities State, from required for rules primary state such future. in payments tax tax these in legal right a

include monitoring avoid to of potential ESG-related contribution this to future. and This of to the situation, the year. this with its company support also a second connection Minas provision for resolution the type of of $XX has million can State its in enhance Therefore, these situations efforts and tools Gerais approximately in investigating decided to record quarter a the

situation. appropriate the keep market will We informed as the of evolution of this

by the to like close for the would presentation remaining mentioning the priorities year. our I of

on our to the exploration Pasco Project. Integration ramp-up as Aripuana the advancing completing Cerro as programs the on with working continue will related well on studies We mineral

focused optimize strengthening current CapEx We working This costs to to will our reduce the addition to capital. remain in and scenario sheet. aiming contribute supporting position challenging in price on our and balance will productivity,

are deliver beginning the at our of targets. the we on laid with to track the we We guidance And out full-year confident year. are

presentation. all to happy we be With you will attending your take for Thank questions. this that,

We We to able questions be phone. questions the [Operator move now might to the begin over Instructions] will question-and-answer session. webcast have currently no We on now.

everybody. Hi,

questions. first the thanks The question, for

it prices, Nexa The cost that The higher quartile are only first low was from question first EBITDA? Kisluk is in cost the negative question mining EBITDA X%. but the from having Does the mean yet Hernan with MetLife. margin producers is, zinc curve, of sits

It's you for Rodrigo. del Jose you, question. the Hi. CFO. Carlos Thank Valle, Thank

Here, producers the would with see way higher-cost is way -- are -- are I would prices. certainly I the is struggling see facing these that

that is is going important don't few However, margin represent performance One the item and to is a ramp-up to continue status, future evolve be. to a results seeing is still our next -- for to contribute that what that Aripuana in we're Nexa's the necessarily Nexa favorably going here in quarters. so

are quarter, million way. that are provisions, $XX mark-to-market, example. which had of in And in are to market one related clear terms there In the may to for NRV happen provisions a we that's always somehow the recurring provisions, really point. not be have market don't legal for So things close that not seen in by this to that

the with at Nexa definitely is cost achieve these So are I wouldn't normal producers margin mentioning having for prices. said that, higher X% see prices, you that could not but some that say conditions difficulties these Nexa representative what of under

-- Aripuana. And that Carlos for the which of of Jose really this us, to saying, to Ignacio. X% am this the is And to $XX provisions add add have case low I is effect million, saying, is in we what and Carlos Jose besides

from that CapEx will improve generation Aripuana of in flow first so a going today, are that with we which positive. be and and and that, prices Now, it's by cash quartile The the one Aripuana you mine that. and is so say now with by I our mine all these make other first Aripuana that quartile. that is in that, is will beginning money. to in that if a the more And in want the the is program used smelter you being the that reflect launching that and influences mine still thing or comment forward, mines The of is we ramp-up, second important and less is most them losing that is and go starting that profitability activities operations have, the in is will at increase smelter, we curve money of money, are

Jose Ignacio. thank Okay, Thank Carlos. you, you,

another from question the It Declan audience. from from Hanlon have Santander. comes here We

from management capital Regarding the the see the cash of the for cycle the items guidance given EBITDA the you you and how in these working actions cash you on generation, detail where line second to these how year? -- the can provide working presently? Secondly, impact full more capital year anticipate half

Rodrigo. your also you, question. Thank Thank you for Declan

to Here inventory the the here that of it's shorten in reducing the capital I cycle. part the working that And reversion we said impact in it in next simply the -- we related last we that quarter. so had And working few would will are in negative aspects think mainly was the in key remember if I that first revert quarters. capital say can the call, you this

to is that related to to reduce mainly reduce So is in part of rest I as inventory trying the the optimize capital. inventory, this, to units transportation mentioned, of levels all reversion and working and operating initiatives, the

influenced this you by predict. In cannot price, terms largely EBITDA, know, we will be as of which

So difficult can on to our this. that is it you a view levels. production What reaffirming give say are will be we we

that's as cost focusing on piece So the optimization. one and do control we're always well that as we on that

Okay. Thank Jose Carlos. you,

from another elaborate the you on certain to final the from is able provision? please have million. recover be Will amount Spiess that customers We question be that Morgan measures? you $XX paid VAT from Jens will How legal investigation Stanley. Could through amount

provision the that all investigation have customers that are involved we million in that today. of Yeah, $XX this comprises the

with What So amount XXX% that the this amount that tax half certain we a credits is we this are use amount are of in authorities that will investigation. the we is discussing have. of

accumulated over have years We credits. of a lot tax

monthly half this will them be used in in amount in of be to going half condition. if installments this And we months. paid So XX in paying the other arrive is at installments,

just has investigation regard. we early the other any That we and less information provide or There an because on So this two that's clients. that, started. is process are cannot today in where days more is for still

you, Thank Ignacio.

revise it investments guidance for comes the year. The the We from Morgan have Nexa Where to reduce possibility Stanley. down another if CapEx VAT? would their to mentions the company question

again be Thank too And we will And right tell. once are in -- be the will you. we're revision company's be. the not to be the the that's announcing what complete making safety. we that -- will and And not now those those what announcing are we here. question or that performance believe thank it we you evaluation. CapEx, CapEx Yes, would components But be critical quarter. the early areas It's because obviously, that next will this we for in to to that evaluating why we company's

Carlos. Jose you, Thank Okay.

here. We have question another

There question communities trouble Platts. you the year? one Atacocha. have have with foresee recurring this at Global S&P we Do Sorry, from roadblocks further been

Atacocha the Yes, changed months. the doing the before very more the was pressing agreements actually now has pit, Atacocha working we strategy Atacocha on are that XX claim much communities -- at on were were time. in last the open so amounts they is stopping What -- that company, that around the

So on the them will if vandalism not, stop commit pushing they more. will to and company our our were pay and pit around And offices equipment. I I the

was, And legally the demanding strategy we if the the with So some the were And we firing you suffer. we the of these operations are workers that negotiate we of communities we and okay, been communities have we have you we did will stopped, we in been have -- the cannot exposed. say, workers. been them, benefits cutting all will stop pit changed, terms, also these

stoppages So they and that can these same hurt themselves. us, the company feel the as

in I is resumed and as say, communities were a clear, context. and forward with the situation, So we understood speaking most took we us it [Maushcan] were agreements, And mine last the yesterday. we developing agreed that now XX has of move months. close -- been This that and all we would almost month, partners almost the of these they same month stop terms the one which a the the of It an on developing We agreement that, small community. operations communities -- case are Most us took doing talking we last as community, this by lose are in (ph) the the and accounts our for as last before. with them. with in a authorities the

other new this it's they we that. If stop So that, it's making the won't also gains business we that, context that answer coming we keep and having have question see I stop they see the say is, given if all stoppages. coming stoppage probability But the lose-lose I strategy. that months said community to that your would the will monitoring would know months. is agreements say -- us, of Nexa, sure difficult that very any sometimes generates that we some strategy, that that there But complying don't and the is in the to any in this a the Peru, other have a with I

Okay. Thank you, Ignacio.

these a pressure We Botha a towards Niel Where have net this bit continues? leverage trading one risk One. Net question in if do has to currently year-end. X.X at EBITDA weakening recently, of times ratings credit Ninety you from increased on from trend debt Is ratio. there see leverage

you and you, Thank the Niel Rodrigo, for correct. Leverage that thank is up. gone has question. Yes,

is lower to the of lower However, related prices mainly are this and lower EBITDA prices. increase that consequence

we cash, factors control. cannot that we it's The right. increasing EBITDA ones unfortunately, that on levers much, optimizing can preserving that trying a going do are of the leverage preserving Prices we're the be are the we on to to a perspective, of about. that those much is And the business we with -- consequence optimize part don't really productivity. focusing So cost, control

try important all So, we're In line just of efficient with at it's that again we make I these most our that prices. the to that, sure to had emphasize continuing make also money operations operations. to think

smelters. That's cannot working that further. the So the that at improves and we're prices if both doesn't that's mines on we at now, better. right what And mean improve this

our our business been under understand ratings. have that aware they cash we there as know the as terms scenario. them. communication impact In and low rating be efficiency we and this of to price taking we of current close should with maximize productivity preserve And on agencies, measures have are no They far and

Thank you, Jose.

in my Credicorp for quarter-on-quarter questions. for what there? would we the taking the to expect Capital. are can I know a increase, question Aripuana cost quarters from from given Orlando like have going be morning. Good to what we Thanks following the We Barriga

earlier going good lost a relates this the I $XX million lower, second because downtime the that from question it's we're we the on it that third yet. we creates about Aripuana and also of quarter, that was And up. an been much in that reliability July, hours fourth have down. mean, going these asked. quarter Yeah, to recoveries and are the be to amounts plant question. be ramp-up, $XX because the expect of quarter, to go haven't is to are we And up, for to And are more, the is talked selling XXX think I CapEx $XX The first improve, us metal was going trends In there. quality in than important was the very the it's to going in the close cost that's higher million are concentrate million. hours to around In

environment stabilizing to year and positive more that, an is this create to idea basis. we're make running is plant early, this to and guidance we it's for you a half of today, process, still second XXX% sure Having that are the CapEx ramp going give the the So cost up. because said around spending up probably of

plant to in CapEx so the in spending prepare right the the we more We are some feed mine the direction. can mine,

in half the much positive going cash some that be we negative are that is the costs flows comfortable So first in lower say to we the had third of the giving What we the are I in fourth that not in quarter, that hopefully direction. and you have. And so the today. good guys are the quarter. KPIs around The actually can of that's the end there, going we achieving, are can Aripuana see say year that nameplate you we capacity towards is very guidance showing, we giving is a what can still

question We Thank sorry, JP you, -- have Ignacio.' Morgan Morgan Stanley. from another

second that total Aripuana had flow much the cash How $XX as program? the the You on start-up impact free of impact million quarter. since negative a accumulated ramp-up the in mentioned

lower second expect million quarter the was in number the year to that million was quarter half as this down. CapEx going is because to as -- costs concentrate, quality And plant the mean, saying. is $XX of $XX much first I slow this be saying million Yeah, year to the down, will or going ramp-up, the second I I in we going generate the is go $XX almost was in more

So much better in say. second of will this a much I position shape, better would we half year, and be

conclude with we session. And that will question-and-answer our

hand Ignacio Now his go Mr. to over we final will for ahead. remarks. Rosado, please

Thank you quarter the this prices much in call. for a very very given you much. all zinc. Thank XX of very us attending This decrease for difficult was

produce. the zinc is As main know metal we

this the we rest the prepared are The type are situation these of the soon. We in bit. for in states is of We getting indicators why that's the to conscious helping year. price that won't that zinc indicators recovering case, revert we are prices the positive a little But know -- in face any industrial that all still not China is segment some need.

We as to will the have year probably be well. next and prepared,

cash produce So sure that positive make we to are flow. we very committed

up projecting. be We we are that are very outlook in committed that and Aripuana the will running

hopefully prices from when in that debt Aripuana the go benefit to flow. guidance. And We for cash a is We achieve priority our in would project. down, us as lot The well. we our are very of of our committed money spend reduction a

So reduction priority. that of that is we are aware our very

good will And results. you our very three we that, you third trends on a day. see to that. thank quarter in that are the presenting much and see everybody. have months with And are you. And coming in like would also I Thank will quarters. you Thank projecting committed the everyone We we to

you now Thank presentation. has concluded. attending The much very for conference today's

great a your have and now lines disconnect You may day.